Hero gets a push from buyers

World's largest two-wheeler company adds Rs 13,620 crore in wealth for investors over FY14

Strong rural demand, spurred by a favourable monsoon and increased preference for scooters, particularly in urban markets, drove up volumes for Hero MotoCorp, which beat market estimates to post sales of 524,028 units in March.

While wholesale volumes grew 12 per cent last month and by three per cent for the entire financial year, retail sales increased seven per cent in FY14, indicating a steady pull for Hero two-wheelers. Given the momentum and new launches, the company is confident of strong sales in the ongoing financial year.

Anil Dua, senior vice-president (sales & marketing), said: “Our strong sales performance in FY14 is reflective of our new strategic approach, that focuses on game-changing technologies. FY15 will be loaded with a slew of new launches, including many we showcased at the recently concluded Auto Expo. These will be backed by strong marketing campaigns and continued market expansion. We are gearing up for increased demand, with the commissioning of the Neemrana (Alwar, Rajasthan) plant this financial year.” (FINANCIALS)

The company added Rs 13,620 crore or 44 per cent more to its market value in the financial year ending March, making investors happy.

The shares were trading at Rs 2,217 each on the BSE as on Thursday.  The 110cc Dash scooter, the 125cc Dare and a commercial production-ready version of the hybrid Leap model are scheduled to hit the roads in the coming financial year.

Angel Broking in a report said, “We expect the momentum in two-wheeler sales to continue, driven by rural demand and new launches. We expect scooter sales to continue outpacing motorcycle sales due to a low base effect and due to increasing preference for scooters over motorcycles.”

As the growth in scooters is expected to outpace that in motorcycles over the next two to three years, the company has also eased the capacity constraints it faced for most of FY14.

It raised production capacity for scooters by 25 per cent to around 900,000 units yearly from January.

Dua said, “We were selling between 55,000-60,000 units of Pleasure and Maestro every month. Demand was outstripping supply. To address capacity constraints, we expanded monthly production capacity for scooters to 75,000 units from January. Even with the newer models coming in, capacity would not be an issue any longer because we would have up and running two new manufacturing units, in Rajasthan and Gujarat, shortly.”

Dua expects the segment to contribute as much as 30% to total two-wheeler sales over the next few years from the current 24%. This apart, markets have also hedged their bets on the Munjals' promoted firm as the recent cut in excise duty will impact least margins in HMCL. Antique Stock Broking Limited in its report explains, "The recent excise cut announced across segments would require companies to compensate dealers for inventory loss, which would lead to a one-time impact on margins (dealer compensation will form a part of marketing costs).

Hero MotoCorp would be the least impacted due to the excise cut as 35% volumes come from the tax haven Haridwar plant." Tomorrow: Sun Pharma